MABS Guide to the Personal Insolvency Act, 2012

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1 MABS Guide to the Personal Insolvency Act, 2012 DISCLAIMER: This Guide is for general information purposes only and does not constitute legal, financial or other professional advice. Specific advice should be sought before proceeding with any course of action with which you are unsure. Any and all information is subject to change without notice. No liability whatsoever is accepted by MABS ndl or any MABS company for any action taken in reliance on this information

2 MABS Guide to the Personal Insolvency Act 2012 Contents Section 1 Introduction 2 Section 2 Debt Relief Notices 5 Section 3 Debt Settlement Arrangements 13 Section 4 Personal Insolvency Arrangements 23 Section 5 Bankruptcy 35 Section 6 - Offences 37 Section 7 Who s Who 38 Section 8 Conclusion and Glossary of Terms 40 MABS Guide to the Personal Insolvency Act

3 NOTES Section 1 Introduction What can this Guide do for me? This Guide has been designed by the Money Advice and Budgeting Service (MABS) to help you to understand the Personal Insolvency Act 2012 ( the Act ). It will help you to think about your own situation and whether one of the options available under the Act might be suitable for you. This Guide will also help you to prepare for a meeting with an Approved Intermediary (AI), if you have decided to go ahead with an application for a Debt Relief Notice. The Approved Intermediary Service within MABS will support you with this application and, if you would like more information on this Service or the application process, our MABS Guide to Debt Relief Notices will help you with this. For more information on the other provisions of the Act, please refer to the website of the Insolvency Service of Ireland at or call them on Please remember this is a Guide and not the actual law itself. Each case will be different and what may work for one person may not work for another. What you read here is general and may not apply to your case. For a number of years, many of us earned more money than we had before. We may have made decisions and choices, believing that we would always have that money coming in and may have borrowed money, in the belief that we would have no trouble paying it back. Sadly, many of us have a lot less money now, because we may have lost a job, we may now be paid less or we may have less from Social Welfare than we had before. The end effect of this is that we find ourselves with less money but also still 2 MABS Guide to the Personal Insolvency Act 2012

4 owing money to others. In that situation, some people find that they simply cannot pay back what they owe. If you are in this situation, then this Guide should be able to help you decide what your next steps will be. The Law When you borrow money from a bank, credit union or from a licensed moneylender who calls to your home, whenever you use a credit card, buy through a catalogue and pay by instalments or if you buy furniture, a car or a van on hire purchase, all of these debts have to be paid back. In each of these cases you signed an agreement (a contract), promising that you would repay what you borrowed. If you do not repay, then the law gives the lender the right to go to court to get their money back. In 2012, the Irish Government brought in changes to the law which give people struggling with their debts more options. These options became available in The new law is called the Personal Insolvency Act 2012 ( the Act ). This Act sets out a number of options also known as remedies for those who are unable to pay their debts in full as they fall due for payment ( Insolvent ). "Insolvent" means that you are unable to pay your debts in full as they fall due for payment. There are four remedies available under the Act: 1. Debt Relief Notices, or DRNs, for those on a low income, with very few assets and with certain debts, known as qualifying debts, of 20,000 or less. 2. Debt Settlement Arrangements, or DSAs, for those who may not qualify for a DRN because their income, assets or debts are too high. NOTES MABS Guide to the Personal Insolvency Act

5 NOTES 3. Personal Insolvency Arrangements, or PIAs, for those who have a high amount of debt, usually including a mortgage (there must be at least one secured debt, which is a debt attached to your assets, for you to be able to get a PIA) and with some income to make repayments. 4. Bankruptcy, for those where no other remedy is possible or preferable in their circumstances. This Guide looks at these remedies to help you to make a decision on what options are available to you and what best suits your needs. Information on these remedies is also available through the Insolvency Service of Ireland website, What is the Insolvency Service of Ireland (ISI)? The Insolvency Service of Ireland or ISI is the agency set up by the Government to process all the new arrangements or remedies under the Act. It also authorises and regulates the Approved Intermediaries and Personal Insolvency Practitioners under this Act. Another function is to keep a register of all those who avail of the new arrangements. This register can be inspected online by members of the public. They will not be able to see all of the register but can search it by name or address. 4 MABS Guide to the Personal Insolvency Act 2012

6 Section 2 - What is a Debt Relief Notice (DRN)? A DRN is a notice from the court that states that you are unable to pay your debts and stops your creditors from being able to take any action against you for 3 years (except in criminal cases). This time is called the supervision period. At the end of the supervision period, if your situation has not improved, one or all of your debts are written off. If you owe the debt jointly with someone else, they will still owe the full amount of that debt unless they also have a DRN, as you can only apply for a DRN in your own name and not with someone else. This may sound like a good outcome and for many people it is. But like all things, there are disadvantages as well and looking for a DRN is not something to do lightly. It is very important that you fully understand what you are getting into and what it will mean for you in the future, in the years after the supervision period has passed. It is important that you understand that a DRN is given by the court, so it is a legal order made for you. Because of this, you must be absolutely open and truthful and be prepared to have all of your income and all of your spending closely examined. You may need to discuss this with your partner, as the consequences of applying for a DRN and of taking on a DRN, are serious. NOTES MABS Guide to the Personal Insolvency Act

7 NOTES You will need to work with an Approved Intermediary to apply for a DRN. An Approved Intermediary (AI) is a person, authorised by the Insolvency Service of Ireland, to help debtors through the process of making an application for a Debt Relief Notice. MABS has a number of staff acting as Approved Intermediaries throughout Ireland. An Approved Intermediary will not make any decision for you, will not tell you what to do, will not give you advice on money or debt and will have limited communication with your creditors. If you need to talk to someone about more general issues on money and debt or if you want to discuss what a DRN might mean for you before making an application, you can meet with a MABS Money Adviser, who is not your AI, who will be happy to work with you on this. You can find details of your local MABS office on or contact the MABS National Helpline on Most of all it is important to remember that a DRN is not a way of avoiding your debt. It is a remedy for those who really cannot pay their debts and for whom there is no other way out of their debt. Who can get a DRN? There are a number of rules for applying for a DRN. This means that you must meet certain conditions to be able to apply. These conditions are known as the Eligibility Criteria. Before beginning the application process, you can judge for yourself whether you think you may qualify. You can look at each of the conditions or criteria now and think about whether or not each one may apply to your situation. If you are unsure, then you can contact MABS or the ISI for further information. Even if you think that you might qualify, you will still need to speak to an Approved Intermediary to be absolutely certain. 6 MABS Guide to the Personal Insolvency Act 2012

8 The conditions or criteria might seem complex but, generally speaking, they fall into four main sections. The Eligibility Criteria listed here are not complete. Your Approved Intermediary will need to go through each one with you to decide how they affect your situation. However the details below will act as a guide for you. 1. Debt How much you owe and the kind of debt you have is the first condition we recommend that you look at. A DRN can only be given to a person who has certain debts (called qualifying debts ) of 20,000 or less. Not every debt will be a qualifying debt. Some money you owe may be excluded debt, which means it cannot be included in a DRN. Excluded Debts are set out in the Act and cover: Maintenance and other family law payments ordered by a court Money owed to another person due to personal injury or wrongful death Loans or debts obtained by way of fraud or similar behaviour Court fines in respect of criminal offences Court ordered payments made under the Proceeds of Crimes Acts Other debt you owe may be excludable debt, which is debt that may or may not be included in applying for a DRN, depending on whether the creditor will agree or responds to a request from your AI to be included in the DRN application. Excludable Debts are also set out in the Act and cover: NOTES MABS Guide to the Personal Insolvency Act

9 NOTES Taxes, duties, levies and similar charges owed to the State Social Welfare debts (e.g. overpayments of benefits) Local government charges, Household Charges and rates due to a local authority Debts owed to the HSE under the Nursing Home Support Scheme Service charges or property management fees If you owe any of these debts and would like to have them included in your DRN application, you can ask your Approved Intermediary to write to your creditors for their permission to be included. If the creditors agree or if they don t reply to the letter within 21 days, then they will be included in your application. Even where your debt is not an excluded or an excludable debt, you may still only be able to include part of the full balance outstanding as a qualifying debt in your application for a DRN. If more than one quarter of your qualifying debt has been built up within the last 6 months, you will not qualify for a DRN at this time. If you paid one of your creditors a larger amount than the others, or a lump sum, in the last 2 years, leaving much less money available for your other creditors, you will not qualify for a DRN at this time. In looking at your debt, the Approved Intermediary will look at all you owe and where you owe it to and calculate how much of your debt is qualifying debt. To qualify for a DRN, you can have more than 20,000 of total debt but 20,000 or less must be qualifying debt. Generally speaking, this will be debt to a bank, credit union, credit card, catalogue company or licenced moneylender or arrears owed in rent or to a utility company. A utility debt is a debt or arrears that you owe to your electricity, gas, oil, telephone or television company. 8 MABS Guide to the Personal Insolvency Act 2012

10 Your Approved Intermediary will examine all of your debt, working out which debts can be included and will advise you on your options. 2. Assets You can only apply for a DRN if you own assets worth less than 400. However, there are some exceptions to this amount, as follows: Assets are anything that you own, e.g. property, cash, savings, shares, cars, computers, sports equipment, etc. a. Household items furniture, electrical appliances and so on and tools of the trade - to a total value of 6,000, are allowed. b. Jewellery one piece of jewellery to a maximum value of 750 is allowed, unless you have a qualifying debt which was used to pay for this jewellery. If you have more than one piece of jewellery, the rest must be included in the 400 limit mentioned above. c. Car a car or vehicle to a maximum value of 2,000, that you reasonably need, is allowed unless you have a qualifying debt which was used to pay for this vehicle. If your vehicle was altered in some way to provide for a disability, whether yours or of your dependants, the 2,000 limit will not apply. If, in the last 2 years, you gave a gift to someone or sold or transferred ownership of an asset for less than it was worth and doing so caused you to be unable to repay your debts, then you will not qualify for a DRN at this time. If you own your own home or any property, with or without a mortgage, you will not qualify for a DRN. NOTES MABS Guide to the Personal Insolvency Act

11 NOTES You must provide your Approved Intermediary with a value for each of your assets to let them advise you on what this will mean for you. 3. Income You can only apply for a DRN if you have a net disposable income of 60 or less per month. Net disposable income is calculated by adding up all of your monthly income wages, salary, anything from welfare (except Child Benefit), pension (including pension payments you are entitled to or would be entitled to within 6 months from your application date), anything from other people living in your household and any other income you earn or are entitled to. You then take away all of the money paid by you as income tax, PRSI and USC, any repayments to excluded or excludable creditors (see page 7) and your Reasonable Living Expenses. The Insolvency Service of Ireland has issued Guidance on Reasonable Living Expenses for different household types, available online from The figure set out in this Guidance, plus your reasonable rent, childcare costs and any extra costs you have due to special circumstances (e.g. higher electricity bills due to illness in the home), are called your Reasonable Living Expenses. These are taken from your actual income as part of the calculation of your net disposable income. Your net disposable income is calculated as follows: Income (except Child Benefit) LESS Tax, USC, PRSI LESS Reasonable Living Expenses LESS Payments to excluded debts LESS Payments to excludable debts LESS Any other levy your income is subject to 10 MABS Guide to the Personal Insolvency Act 2012

12 If your net disposable income is 60 or less per month, you will satisfy this condition. 4. Circumstances You can only apply for a DRN if you are "insolvent" (see page 3) and your circumstances are unlikely to improve for the next three years the supervision period of the DRN. Your Approved Intermediary will make a judgment on this, based on your own situation and on guidelines provided by the ISI. If you had a DRN before, even if it ended early, you will not qualify to apply for a DRN again as you can only ever have one DRN in your lifetime. A DRN can end early if you pay half of what you owe to your creditors or if the court decides to terminate your DRN on the basis of an objection by your creditors or the ISI. If you completed a Debt Settlement Arrangement or a Personal Insolvency Arrangement in the last 5 years, you will not qualify for a DRN at this time. A Debt Settlement Arrangement (DSA) and a Personal Insolvency Arrangement (PIA) are two of the other options available under the Act. For more information on these options please see sections 3 and 4 of this Guide or visit If you applied for a Debt Settlement Arrangement or for a Personal Insolvency Arrangement and were awarded a protective certificate in the last 12 months, you will not qualify for a DRN at this time. Before you can get a Debt Settlement Arrangement or a Personal Insolvency Arrangement, your Personal Insolvency Practitioner (PIP) will need to apply for a protective certificate. This prevents your creditors taking any debt collection, debt enforcement, bankruptcy or possession action against you while your arrangement is being made. For more information on these options please see sections 3 and 4 of this Guide or visit NOTES MABS Guide to the Personal Insolvency Act

13 NOTES If you have any connection with bankruptcy, either where you have applied or you are applying yourself, or if a creditor has applied or is applying to have you declared bankrupt, or if you were discharged from bankruptcy in the last 5 years, then you will not qualify for a DRN at this time. The exact effect of the bankruptcy condition on your application will be looked at by your Approved Intermediary. I think I am eligible for a DRN what do I do? You cannot apply for a DRN yourself, you need an Approved Intermediary to do it for you (see page 6). To meet with an Approved Intermediary, you need to make contact with MABS by calling the MABS National Helpline on or by contacting your local MABS Service. For details of your local MABS office please see our website at MABS does not charge you for this service but the Insolvency Service of Ireland will charge an application fee of 100 that you will need to pay before your Approved Intermediary can complete your application. If you do decide that a DRN may be for you, the MABS Guide to Debt Relief Notices will help you further, available at or from our local services. Please be aware that the information on DRNs included in this Guide is for information purposes only. 12 MABS Guide to the Personal Insolvency Act 2012

14 Section 3 What is a Debt Settlement Arrangement (DSA)? A Debt Settlement Arrangement (DSA) is an agreement reached with your creditors and approved by the court. If successful, a DSA sets out a repayment plan for your unsecured debts over a period of up to 5 years, which can be extended to 6 years in certain circumstances that you agree to. At the end of the agreed time, any unsecured debt outstanding is written off. As in the case of a DRN, there are particular rules on the type of debts that can be included and on the rights of the creditors involved. You cannot apply for a DSA on your own, you must apply through a Personal Insolvency Practitioner, (also known as a PIP). A PIP is a professional adviser who will make your Debt Settlement Arrangement application on your behalf for a fee. This may be a good solution for some people but it is important to remember that taking on a DSA will have consequences for you into the future, so you need to think carefully before proceeding. Who can get a DSA? There are a number of rules for applying for a DSA. This means that you must meet certain conditions to be able to apply. These conditions are known as the Eligibility Criteria. Before beginning the application process, you can judge for yourself whether you think you may qualify. You can look at each of the conditions or criteria now and think about whether or not each one may apply to your situation. If you are unsure, then you can contact MABS or the ISI for more information. Even if you think that you might qualify, you will still need to speak to a PIP to be absolutely certain. The conditions might seem complex but, again generally speaking, they fall into four main sections. NOTES MABS Guide to the Personal Insolvency Act

15 NOTES The Eligibility Criteria listed here are not complete. Your PIP will need to go through each one with you to decide how they affect your situation. 1. Debt There is no minimum or maximum level of debt for a DSA but all of your debts must be unsecured. Unsecured debt is a debt that is not attached to any asset (e.g. a credit card debt, a personal loan, etc.). Examples of unsecured debts include debts owed to a bank, credit union, credit card, catalogue company or licensed moneylender or arrears owed in rent or to a utility company. If you have a mortgage you can still qualify for a DSA but cannot include your mortgage in the application. Not every debt can be included in a DSA. Some money you owe may be excluded debt, which means it cannot be included in a DSA. Excluded Debts are set out under the Act and cover: Maintenance and other family law payments ordered by a court Money owed to another person due to personal injury or wrongful death Loans obtained by way of fraud or similar behaviour Court fines in respect of criminal offences Court ordered payments made under the Proceeds of Crimes Acts Other debt you owe may be excludable debt, which is debt that may or may not be included in a DSA, depending on whether the creditor will agree. 14 MABS Guide to the Personal Insolvency Act 2012

16 Excludable Debts are also set out in the Act and cover: Taxes, duties, levies and similar charges owed to the State Social Welfare debts (e.g. overpayments of benefits) Local government charges, Household Charges and rates due to a local authority Debts owed to the HSE under the Nursing Home Support Scheme Service charges or property management fees If you owe any of these debts and would like to have them included in your DSA application, you can ask your PIP to write to your creditors for their permission to be included. If the creditors agree or they don t reply to the letter within 21 days then they will be included in your application. If more than 25% of the debts to be included in your DSA were built up within the last 6 months, you will not qualify for a DSA at this time. Your PIP will examine all of your debts, working out which debts can be included and will advise you on your options. 2. Assets There are no limits on the value or amounts of assets you can own to qualify for a DSA. Assets are anything that you own, e.g. property, cash, savings, shares, cars, computers, sports equipment, etc. However, in order to reach agreement with your creditors, they may expect you to sell some of your assets and to use the money you get to pay off some of your debt. You will not need to sell or leave your family home, unless it is in your best interests and you have agreed to do so after NOTES MABS Guide to the Personal Insolvency Act

17 NOTES taking independent legal advice. You will also not need to sell assets needed for your business or employment, unless you agree to do so. A PIP can give you advice you on this. 3. Income Again, there are no limits on the level or amount of your income to qualify for a DSA. However, the repayment plan reached with your creditors as part of the DSA cannot bring your income below that of your Reasonable Living Expenses. The Insolvency Service of Ireland has issued Guidance on Reasonable Living Expenses for different household types, available online from The figure set out in this Guidance, plus your reasonable rent, childcare costs and any extra costs you have due to special circumstances (e.g. higher electricity bills due to illness in the home) are called your Reasonable Living Expenses. Your PIP will deduct these from your actual income to see what portion of your income is available for payments to your creditors. For a DSA, the Reasonable Living Expenses allowed for your household type, as set out in the ISI Guidance, is your minimum income level. If your income does not exceed your Reasonable Living Expenses, then you will have no money to offer your creditors. Only the portion of your income which is more than your Reasonable Living Expenses can be offered to your creditors. 4. Circumstances You must be "insolvent" to apply for a DSA and the DSA must make you solvent within 5 years of the application date. "Insolvent" means that you are unable to pay your debts in full as they fall due for payment. Your PIP will make a judgment on this, based on your own situation and on guidelines provided by the ISI. 16 MABS Guide to the Personal Insolvency Act 2012

18 The PIP will also determine whether you are eligible under the other criteria set out in the Act. These are very specific and include: You must be currently domiciled or have lived in the Republic of Ireland within 12 months of your application date or have had a place of business here in that time That you are not currently involved in any bankruptcy proceedings and were not in the 5 years before this application That you do not now have a DRN that you did not have a DRN within 3 years of this application That you do not have a Personal Insolvency Arrangement (PIA) in place and did not have one within 5 years of this application That you have never had a DSA before (you are only allowed one in your lifetime) That you have not, in the past 12 months, had a Protective Certificate issued in relation to a previous application for a DSA or a PIA. When the application for a DSA goes before the court, the judge may have some discretion over some of these criteria. Where he or she believes it would be fair to allow the application for a DSA, he or she may take into account special factors outside of your control. NOTES MABS Guide to the Personal Insolvency Act

19 NOTES Applying for a DSA The application process is complex and is done for you by a PIP. It is important that you understand that a DSA is a legal remedy, giving you protection from your creditors. When applying for a DSA you must be open and honest and give full disclosure of all your details to your PIP. The ISI has legal power to request information from any government department, agency or body. Once you meet with a PIP, he or she will review all information provided by you and may ask you to provide more. He or she will review all of your circumstances, as he or she is required to do by law and will make a judgement as to your eligibility for a DSA. Once satisfied, the PIP will then begin the application process. As part of the application process, you will need to complete a Prescribed Financial Statement. This is a summary of your financial position. It contains details about you, your income, your expenditure, your assets and your debts / liabilities. It is an important part of the application process and must be accompanied by a Statutory Declaration which is sworn in front of a solicitor / Commissioner for Oaths / Peace Commissioner. A Statutory Declaration is a legal document that you must have sworn. It is important that the information set out in the Prescribed Financial Statement and Statutory Declaration are correct and show a full picture of your financial affairs. The PIP will then apply for a Protective Certificate (see page 11 or Glossary of Terms), which will place a hold on all legal proceedings from your creditors for a limited time (70 days), giving time for your PIP to contact your creditors and set out a proposal for dealing with your debts. Your PIP may then call a meeting with your creditors and ask them to vote on the proposed 18 MABS Guide to the Personal Insolvency Act 2012

20 agreement. If 65% (in value of debt) of your creditors agree with that proposal, your PIP will then submit the application to the ISI. The DSA has consequences for the creditor and so the creditor is given a right to appeal under the law. The ISI will weigh up the grounds for any appeal in deciding whether or not to grant the application for a DSA. If satisfied, they will forward the application to the court for approval. Once the DSA is approved by the court and recorded in a public register by the ISI, the DSA will begin. What are the terms of a DSA? The DSA is exactly what it is called it is an agreement between you and your creditors for the settlement of your debts. The exact details will be negotiated by your PIP but the law states that certain items must be included: 1. The agreement can run for a maximum of 5 years but can be extended to 6 years if that is what you and your creditors agree to. 2. If you keep to the terms of your agreement for the full period of time, then you will be discharged from your DSA, meaning that any outstanding balances on your unsecured debts will be written off. 3. While your creditors may demand that you sell some of your assets as part of the agreement, a DSA can only call for the sale of assets which you need to conduct your business or your employment if you agree to do so. 4. The agreement must leave you and your family with enough income to have a reasonable standard of living. This means that your income, NOTES MABS Guide to the Personal Insolvency Act

21 NOTES after repayments to your creditors, cannot go below the Reasonable Living Expenses for your household type set by the ISI (See page 16 for more details). 5. The agreement should set out the details of any fees or costs paid or to be paid to the PIP. 6. The agreement must set out what will happen to your debts in the event of you dying or becoming mentally ill, to the extent that you cannot look after your own finances, during the period of the agreement. 7. The agreement cannot force you to sell your family home or to leave it, unless it is shown to be in your best interests to do so and you have agreed after taking independent legal advice. 8. The agreement must be reviewed by the PIP at least every year and must include the completion of a new Prescribed Financial Statement. 9. The agreement must set out the circumstances in which the DSA may be varied or amended. What happens during the term of a DSA and what are my obligations? You will have a relationship with your PIP for the duration of the agreement. He or she must notify creditors of any change in your circumstances which may have an effect on the agreement. When you make payments under a DSA, these are paid directly to your PIP, who first deducts his fee, then distributes the balance to your creditors as agreed in your DSA. The PIP must review the agreement at least every 12 months and will take steps to amend or 20 MABS Guide to the Personal Insolvency Act, 2012

22 vary it if your circumstances change. The PIP also responds to any queries which may come from the ISI or your creditors and will keep a record of all business carried out in respect of your agreement. The list sets out certain obligations on you as a debtor during the time that your DSA is in place: 1. You must give the PIP a complete record of all your assets, debts / liabilities, income and any other matter that could affect your circumstances 2. You must comply fully with the process and provide any information requested by the PIP 3. You must inform the PIP of any change in your circumstances, particularly anything which affects your ability to repay 4. You cannot take out a loan or get any type of credit of more than 650, either in your own name or with someone else, without telling the lender / creditor that you have a DSA 5. You cannot dispose of, sell, transfer ownership or mortgage any property over a set value, as set out in the DSA 6. Should you become aware of any mistake in the DSA application or any document or statement that you included with that application, including something that you forgot to discuss, you must inform the PIP 7. You cannot make payments to any creditor above those which is set out in the DSA NOTES MABS Guide to the Personal Insolvency Act

23 NOTES I think I am eligible for a DSA what do I do? If you believe that a DSA may be for you, you will need to make contact with a PIP. The PIP will act on your behalf and will help you to figure out whether you are eligible. Before making an appointment, try to gather together all your papers relating to your debts, your assets and your income. Be satisfied that you have explored other options before starting the PIA application process. Where can I find a PIP? PIPs are licensed by and registered with the Insolvency Service of Ireland (ISI). A full list of PIPs is available on the website of the ISI at or you can request the list by calling the ISI on Please be aware that the information included in this Guide is for information purposes only. For more information on DSAs or to find contact details for PIPs, please visit or call the ISI on MABS Guide to the Personal Insolvency Act 2012

24 Section 4 What is a Personal Insolvency Agreement (PIA)? A Personal Insolvency Arrangement (PIA) is another remedy available under the Personal Insolvency Act 2012 ( the Act ). A PIA is an agreement reached with your creditors and approved by the court. If successful, a PIA sets out a repayment plan for both your secured and unsecured debts over a period of up to 6 years, which can be extended to 7 years in certain circumstances, if you agree. Secured debt is debt that is attached to an asset. The most common type is a mortgage on your home, where the debt (mortgage / loan) is attached to your asset (your home). Unsecured debt is a debt that is not attached to an asset (e.g. a credit card debt, a personal loan, etc) At the end of the agreed period, any outstanding balances on your unsecured debts will be written off but you will still be responsible for any outstanding balances on your secured debts, unless your creditors agree to write off some or all of that debt. There are particular rules on the type of debt that can be included and on the rights of the creditors involved. You cannot apply for a PIA yourself; you must apply through a Personal Insolvency Practitioner, also known as a PIP. A PIP is a professional adviser who will make a PIA application on your behalf for a fee. This may be a good solution for some people, particularly those with mortgages and other large debts that they cannot afford but it is important to remember that taking on a PIA will have consequences for you into the future, so you need to think carefully before going ahead with this. NOTES MABS Guide to the Personal Insolvency Act

25 NOTES Who can get a PIA? There are a number of rules for applying for a PIA. This means that you must meet certain conditions to be able to apply. These conditions are known as the Eligibility Criteria. Before beginning the application process, you can judge for yourself whether you think you may qualify. You can look at each of the conditions or criteria now and think about whether or not each one may apply to your situation. If you are unsure, then you can contact the Insolvency Service of Ireland (ISI) for more information. Even if you think that you might qualify, you will still need to speak to a PIP to be absolutely certain. The conditions or criteria might seem difficult to understand at first but, generally speaking, they fall into four main sections. The Eligibility Criteria listed here are not complete. Your PIP will need to go through each one with you to decide how they affect your situation. 1. Debt Any amount of unsecured debt can be included in a PIA; there is no minimum or maximum level. Up to 3m of secured debt can be included in a PIA. This amount can be increased if your secured creditors agree. You must have at least one secured debt, where the asset used to secure that debt is held in the Republic of Ireland. Secured creditors are creditors you owe secured debts to. Not every debt can be included in a PIA. Some money you owe may be excluded debt, which means it cannot be 24 MABS Guide to the Personal Insolvency Act 2012

26 included in a PIA. Excluded Debts are set out in the Act and cover: Maintenance and other family law payments ordered by a court Money owed to another person due to personal injury or wrongful death Loans obtained by way of fraud or similar behaviour Court fines in respect of criminal offences Court ordered payments made under the Proceeds of Crimes Acts Other debt you owe may be excludable debt, which is debt that may or may not be included in a PIA, depending on whether the creditor will agree. Excludable Debts are also set out in the Act and cover: Taxes, duties, levies and similar charges owed to the State Social Welfare debts (e.g. overpayments of benefits) Local government charges, Household Charges and rates due to a local authority Debts owed to the HSE under the Nursing Home Support Scheme Service charges or property management fees If you owe any of these debts and would like to have them included in your PIA, you can ask your PIP to write to your creditor for their permission to be included. If the creditor agrees or if they don t reply to the letter within 21 days, then they will be included in your application. If more than 25% of the debts to be included in your PIA were built up in the last 6 months, you will not qualify for a PIA at this time. Your PIP will examine all of your debts, working out which debts can be included and will advise you on your options. NOTES MABS Guide to the Personal Insolvency Act

27 NOTES 2. Assets There are no limits on the value or amounts of assets you can own to qualify for a PIA. Assets are anything that you own, e.g. property, cash, savings, shares, cars, computers, sports equipment, etc. However, in order to reach agreement with your creditors, they may expect you to sell some of your assets and to use the money you get to pay off some of your debt. You will not need to sell or leave your family home, unless it is clear to the PIP that the cost or expense of you remaining in your home is too high for your circumstances and household type. Your PIP will advise you to get independent legal advice if this is the case. You will also not need to sell assets needed for your business or employment, unless you agree to. A PIP can give you advice you on this. 3. Income Again, there are no limits on the level or amount of your income to qualify for a PIA. However, the repayment plan reached with your creditors as part of the PIA cannot bring your income below that of your Reasonable Living Expenses. The Insolvency Service of Ireland has issued Guidance on Reasonable Living Expenses for different household types, available online from The figure set out in this Guidance, plus your reasonable rent, childcare costs and any extra costs you have due to special circumstances (e.g. higher electricity bills due to illness in the home) are called your Reasonable Living Expenses. Your PIP will deduct these from your actual income to see what portion of your income is available for payments to your creditors. 26 MABS Guide to the Personal Insolvency Act 2012

28 For a PIA, the Reasonable Living Expenses allowed for your household type, as set out in the ISI Guidance, is your minimum income level. If your income does not exceed your Reasonable Living Expenses, then you will have no money to offer your creditors. Only the portion of your income which is more than your Reasonable Living Expenses can be offered to your creditors. 4. Circumstances You must be insolvent to apply for a PIA and having a PIA must make you solvent within 5 years of the application date. "Insolvent" means that you are unable to pay your debts in full as they fall due for payment. Your PIP will make a judgment on this, based on your own situation and on guidelines provided by the ISI. The PIP will also determine whether you are eligible under the other criteria set out in the Act. These are very specific and include: You must be currently domiciled or have lived in the Republic of Ireland within 12 months of your application date or have had a place of business here in that time That you are not currently involved in any bankruptcy proceedings and were not in the 5 years before this application That you do not now have a DRN and that you did not have a DRN within 3 years of this application That you have at least one secured debt secured over an asset held in the state NOTES MABS Guide to the Personal Insolvency Act

29 NOTES That you do not have a Debt Settlement Arrangement (DSA) in place and did not have one within 5 years of this application That you have never had a PIA before (you are only allowed one in your lifetime) That you have not, in the past 12 months, had a Protective Certificate issued in relation to a previous application for a DSA or PIA Your PIA can only include a mortgage on your family home where you have co-operated with your mortgage lender for at least 6 months in any process approved or required by the Central Bank of Ireland. You must have either: or or co-operated fully in this process but failed to reach an agreed alternative payment plan received confirmation in writing from your mortgage lender that they are unwilling to enter such an arrangement reached an agreement with your mortgage lender but your PIP is of the opinion that it would not make any real difference to your financial circumstances in the next 5 years (i.e. you would still be insolvent even if you agree to the payment plan) When the application for a PIA goes before the court, the judge may have some discretion over some of these criteria. Where he believes it would be fair to allow the application for a PIA, he may take into account special factors outside of your control. 28 MABS Guide to the Personal Insolvency Act 2012

30 Applying for a PIA The application process is complex and is done for you by a PIP. It is important that you understand that a PIA is a legal remedy, giving you protection from your creditors. When applying for a PIA you must be open and honest and give full disclosure of all your details to your PIP. The ISI has legal power to request information about you from any government department, agency or body. Once you meet with a PIP, he or she will review all information provided by you and may ask you to provide more. He or she will review all of your circumstances, as he or she must do by law and will make a judgement as to whether or not you are eligible to apply for a PIA. Once satisfied, the PIP will then begin the application process. As part of the application process, you will need to complete a Prescribed Financial Statement. This is a summary of your financial position. It contains details about you, your income, your expenditure, your assets and your debts / liabilities. It is an important part of the application process and must be accompanied by a Statutory Declaration, which is sworn in front of a solicitor / Commissioner for Oaths / Peace Commissioner. A Statutory Declaration is a legal document that you must have sworn. It is important that the information set out in the Prescribed Financial Statement and Statutory Declaration is correct and shows a full picture of your financial affairs. If you want to include a mortgage on your family home in your PIA, you must also make a declaration in writing that you have co-operated with your mortgage lender for at least 6 months in any process approved or required by the Central Bank of Ireland. This declaration will also confirm either: NOTES MABS Guide to the Personal Insolvency Act

31 NOTES or or that you tried but failed to reach an agreed alternative payment plan with your mortgage lender that your mortgage lender has confirmed in writing that they are unwilling to enter such an arrangement that you reached an agreement with your mortgage lender but your PIP is of the opinion that it would not make any real difference to your financial circumstances in the next 5 years (i.e. you would still be insolvent even if you agree to the payment plan) The PIP will then apply for a Protective Certificate (see page 11 or Glossary of Terms), which will place a hold on all legal proceedings from your creditors for a limited time (70 days), giving time for your PIP to contact your creditors and set out a proposal for dealing with your debts. Your PIP may then call a meeting with your creditors and ask them to vote on the proposed agreement. If 65% (in value of debt) of your creditors agree with that proposal, including at least 50% (in value of debt) of your unsecured creditors and 50% (in value of debt) of your secured creditors, your PIP will then submit the application to the ISI. A PIA has consequences for the creditor and so the creditor is given a right to appeal under the law. The ISI will weigh up the grounds for any appeal in deciding whether or not to grant the application for a PIA. If satisfied, they will forward the application to the court for approval. Once the PIA is approved by the court and recorded in a public register by the ISI, the PIA will begin. 30 MABS Guide to the Personal Insolvency Act 2012

32 What are the terms of a PIA? A Personal Insolvency Arrangement is an agreement drawn up between you and your creditors for the settlement of your debts. The exact details will be negotiated by your PIP but the law states that certain items must be included: 1. The arrangement must clearly set out which debts are secured and which are unsecured (see page 23 for definitions). 2. The arrangement can run for a maximum of 6 years but can be extended to 7 years, if you agree. Of course, your agreement may be shorter than this. 3. If you keep to the terms of your agreement for the full period of time that it is in place, you will be discharged from your PIA. This will mean that any outstanding balances on your unsecured debts will be written off. Some or all of your secured debts can only be written off where your secured creditors agreed to do this as part of your PIA. If not, you will still be responsible for any outstanding balances on those debts. 4. While your creditors may demand that you sell some of your assets as part of the arrangement, a PIA can only make you sell assets which you need to carry out your business or your employment if you agree to. 5. The agreement must leave you and your family with enough income to have a reasonable standard of living. This means that your income, after repayments to your creditors, cannot go NOTES MABS Guide to the Personal Insolvency Act

33 NOTES below the Reasonable Living Expenses for your household type set by the ISI. See page 16 for more details. 6. The arrangement should set out the details of any fees or costs paid or to be paid to the PIP. 7. The arrangement must set out what will happen to your debts in the event of you dying or becoming mentally ill, to the extent that you cannot look after your own finances, during the time that the agreement is in place. 8. The arrangement cannot force you to sell your family home or to leave it, unless you agree to do so or unless it is clear to the PIP that the cost or expense of you remaining in your home is too high for your circumstances and household type and you have been advised to get independent legal advice. 9. The arrangement must be reviewed by the PIP at least every year and must include completing a new Prescribed Financial Statement. 10. The arrangement must set out the circumstances in which the PIA can be varied or amended. What happens during the term of a PIA and what are my obligations? You will have a relationship with your PIP for the duration of the arrangement. He or she must notify creditors of any change in your circumstances which may have an effect on the arrangement. When you make payments 32 MABS Guide to the Personal Insolvency Act 2012

34 under a PIA, these are paid directly to your PIP, who first deducts his fee, then distributes the balance to your creditors as agreed in your PIA. The PIP must review the arrangement at least every 12 months and will take steps to amend or vary it if your circumstances change. The PIP also responds to any queries which may come from the ISI or from your creditors and will keep a record of all business carried out in respect of your agreement. The Act sets out certain obligations on you as a debtor during the time that your PIA is in place: 1. You must give the PIP a complete record of all your assets, debts / liabilities, income and any other matter that could affect your circumstances. 2. You must comply fully with the process and provide any information requested by the PIP. 3. You must inform the PIP of any change in your circumstances, particularly anything which affects your ability to repay. 4. You cannot take out a loan or get any type of credit of more than 650, either in your own name or with someone else, without telling the lender / creditor that you have a PIA. 5. You cannot dispose of, sell, transfer ownership or mortgage any property over a set value, as set out in the PIA. 6. Should you become aware of any mistake in the PIA application or any document or statement that you included with that application, including something that you forgot to disclose, you must inform the PIP. NOTES MABS Guide to the Personal Insolvency Act

35 NOTES 7. You cannot make payments to any creditor above those set out in the PIA I think I am eligible for a PIA what do I do? If you believe that a PIA may be for you, you will need to make contact with a PIP. The PIP will act on your behalf and will help you to figure out whether you are eligible. Before making an appointment, try to gather together all your papers relating to your debts, your assets and your income. Be satisfied that you have explored other options before starting the PIA application process. Where can I find a PIP? PIPs are licensed by and registered with the Insolvency Service of Ireland (ISI). A full list of PIPs is available on the website of the ISI at or you can request the list by calling the ISI on Please be aware that the information included in this Guide is for information purposes only. For more information on DSAs or to find contact details for PIPs, please visit or call the ISI on MABS Guide to the Personal Insolvency Act 2012

36 Section 5 Bankruptcy Bankruptcy is the fourth and final remedy available under the Personal Insolvency Act 2012 ( the Act ). It has existed for many years in Irish law but the Act has made important changes to it. Bankruptcy is your option of last resort. It should only be considered after exploring all other options and after weighing up the consequences for your life and the life of your family in years to come. If you owe a creditor more than 20,000 and they have followed processes set out in the law, they can apply to the court to make you bankrupt. You can also apply to make yourself bankrupt if you have more than 20,000 of debt. If you apply yourself, you will need to show the court that you have made every effort available to you to improve your financial circumstances, including a DSA and / or a PIA. You will also need to pay a 650 application fee to the court and to pay for newspaper notices giving details of the proceedings. Whether you or one of your creditors is applying to make you bankrupt, we strongly recommend that you get independent legal advice. A record of your bankruptcy will be kept in a number of public registers. It is not a private matter and this may have an effect on your employment or on you operating a business. You can still have a bank account but banks can impose limits on any account held by you. A bankrupt cannot act as a company director, run for any elected office or be employed in certain professions, such as solicitors. Effect of Bankruptcy A bankruptcy order lasts for 3 years but this can be extended to 8 years in certain circumstances. Bankruptcy NOTES MABS Guide to the Personal Insolvency Act

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